S&P 500 at 6,000: Hold or Fold as Iran Risk and Fed Hawkishness Collide?

• Middle East tensions and Powell’s inflation warning have markets on edge.
• The S&P 500 clings to the 6,000 level, but a slip could trigger deeper losses.
• With oil jumping and Trump keeping traders guessing, the risk-off mood is back.
• Looking for actionable trade ideas to navigate the current market volatility? Subscribe here to unlock access to InvestingPro’s AI-selected stock winners.

European and Asian markets slipped on Thursday, with sentiment clearly rattled by growing fears that the United States may be drawn more directly into the Israel–Iran conflict. The unease was compounded by fresh remarks from Federal Reserve Chair Jerome Powell, who yesterday warned of inflationary pressures ahead — a message that did little to reassure already jittery investors or appease Trump demanding lower rates.

Meanwhile, the US equity futures pointed lower, though cash trading in stocks and Treasuries are shut for the Juneteenth holiday. The dollar, meanwhile, firmed against a basket of major currencies, benefitting from its safe-haven appeal, and oil prices remaining on the front foot. Brent crude saw a sharp rebound from Wednesday’s lows, rising as much as 4% at its peak early on, briefly nudging the $77 per barrel mark. The jump reflects heightened focus on instability in the Middle East, with traders weighing the potential for broader supply disruptions.

Before discussing the macro factors at play, let’s quickly turn our focus on the charts and highlight a few technical developments first.

S&P 500 Technical Analysis and Trade Ideas

The S&P 500 futures chart has almost turned flat on the week after Monday’s gains evaporated amid the Middle East tensions. The Index was hold above key support in the 6,000 region at the time of writing, which needs to hold on a closing basis to keep the bullish hopes alive. This is also where a short-term bullish trend line comes into play, below which is the 21-day exponential average. So, a small intraday dip below the 6K mark wouldn’t completely end the bullish bias, so long as this level holds on a closing basis.

In the event we see a decisive break below the 6,000 support level, then that could potentially pave the way for some technical selling towards last week’s low of 5927, where some stops would undoubtedly be resting now. Below that, you have 5,900 as the next potential support, and then the convergence of the old resistance and 200-day average comes in around the 5837-45 area.

On the upside, 6045 is the first key level of resistance to watch. Above it, Monday’s high at 6109 will come into focus next.

Markets weigh risks as geopolitical tensions and inflation concerns resurface

According to Bloomberg, senior US officials are preparing for the possibility of a strike on Iran in the coming days, with some pointing to potential plans for a weekend strike. However, the situation is evolving and could change. The report kept oil prices on the front foot, which pressured US index futures.

On Wednesday, crude oil prices fell from their earlier highs after Trump suggested the US was not getting involved for now, but the downside was limited as he said that could change. Despite a huge draw in crude inventories - not that this was going to move the market given the focus on the Middle East, oil prices initially fell as Trump kept markets guessing about US military involvement in Iran. The US president said: "I may do it. I may not do it. Nobody knows what I’m going to do."

Meanwhile, the bombardment from both sides continues. This suggests that the conflict is far from over. But for now, at least, the US is not getting involved, if one can believe Trump. However, the Bloomberg article has once again raised fears of the US getting involved, which could make the situation worse.

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